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2016 (2) TMI 1293 - AT - Income TaxDenial of claim of deduction u/s. 80IA(4)(iii) - new industrial undertaking with development of industrial park - controversy regarding the date on which the project was completed - According to AO the assessee is not eligible for deduction u/s.80IA(4)(iii) on the income earned from software park as completion certificate of the building of Bangalore Development Authority was not furnished and the appellant has constructed 15 units instead of 3 units approved by the Ministry of Commerce when the appellant himself has admitted in IPSII before the appropriate authority as on 1st July 2007 - HELD THAT - The infrastructure for the electrical connection in the industrial park was ready on 20.03.2007. The date of occupation certificate issued by the Bangalore Development Authority on 23.06.2007 for which the assessee had Bangalore Development Authority on 29.12.2006 with a provisional Completion Certificate issued by the Architect. It is not within the control of the assessee company to obtain completion certificate from Bangalore Development Authority and the contention of the assessing authority is not correct. The contention of the AO that the fresh approval was required under the non-automatic route for more than the minimum number of units required to be established in the industrial park is not correct because the approval was for minimum number of units and there was no restriction imposed for increasing the number of units and hence no fresh approval is required under the current scenario. Further assessee sent all the details to CBDT for notification on the basis of the first approval as well as after receipt of the renewed approval. The new notification and the Industrial policy 2008 has come subsequently. Assessee has given a representation to the Chairman of Empowered Committee the Director of CBDT for giving an opportunity to assessee. The Empowered Committee has still not withdrawn the approval granted and hence its validity cannot be disputed. As regards the approval issued by the DIPP Ministry of Commerce and Industry we are of the view that the said approval was for non-automatic route and the said approval so granted by the Ministry of Commerce and Industry has not been cancelled till date. Such change has been duly intimated vide IPS- II dt. 01.01.2008 and on consideration of the same the approval dated16.03.2009 has been granted and further the said approval remains in force till date and has not been withdrawn. We find that in similar facts and circumstances in the case of CIT Vs. Ittina Properties (P) Ltd. 2014 (8) TMI 388 - KARNATAKA HIGH COURT held in respect to controversy regarding the date on which the project was completed to be eligible for the benefit of section 80IB that Tribunal has recorded a finding that the building was completed within the stipulated period and therefore de hors this certificate issued by the Panchayat after the building is completed the assessee is entitled to the said benefit. In that view of the matter we do not see any merit in these appeals. Accordingly the appeals are dismissed. Similarly Hon ble Gujarat High Court in the case of Creative Infocity Ltd. Vs. Under Secretary 2012 (4) TMI 117 - GUJARAT HIGH COURT also held that once Industrial Park was approved by Ministry of Commerce Industry CBDT has to suo motto issue notification and if there is delay on the part of the CBDT in issuing notification it would not warrant assessee being denied benefit of deduction u/s. 80IA(4)(iii) - Decided in favour of assessee. Disallowance of interest on interest free advances - enhancement u/s. 251(1) of disallowance of interest - HELD THAT - Assessee has advanced for acquisition of real estate properties loans to sister concerns and share application money in associate concerns which were in same business as that of the assessee i.e. real estate business and hence the said sum advanced are only in the nature of business of the assessee and are out of commercial expediency. Further there is no nexus established between interest bearing funds borrowed and interest free funds advanced to sister concerns no disallowance can be attributed to the assessee on account of interest bearing borrowed funds. Accordingly this issue is decided in favour of assessee and against revenue. Disallowance of depreciation - assets used in the business - HELD THAT - AO has not responded to CIT(A) and accordingly CIT(A) directed the AO to allow depreciation on assets used in the business but after verification of facts and figures claimed now vis- -vis the relevant rate of depreciation as applicable. We find that the assessee s issue is covered as per explanation 5 to sec. 32 of the Act which makes it very clear that the allowance of depreciation is mandatory and has to be considered whether or not the assessee makes a claim in this respect or not. Even otherwise the CIT(A) after admitting additional issue has remitted the matter back to the file of the AO for verification of facts and figure and applicable rates for claim of depreciation and also verification on assets used in the business only. We find no infirmity in the order of CIT(A) and hence the same is confirmed. This issue in both the years of revenue s appeal is dismissed. Addition on account of difference in the statement of accounts declared by assessee - AO has made addition on account of difference on the disclosure made by assessee as per the actual receipt and as per the rent received as per TDS certificate - HELD THAT - Petitioner has received a total of 57, 43, 973/- and this rent of 5, 91, 292/- was received only in next year. Similar is the explanation in the case of M/s. Carrier Net Technologies Pvt. Ltd. amounting to 18, 62, 059/-. It was explained to the AO that the assessee was entitled to receive rent w.e.f. 19.03.2007 @ 11, 76, 100/- which amounts to 1, 40, 95, 533/- for whole of the year but the AO computed the rent in view of the TDS Certificate at 1, 58, 57, 591/-. Hence difference. Similar is the position in respect to Arivana Networks India Pvt. Ltd. being the difference of 17, 93, 381/-. It was explained that a sum of 1, 63, 02, 907/- was shown in the TDS certificate included service tax @ 12.36% on actual rent of 1, 45, 09, 600/- and this difference was on account of service tax at 17, 93, 387/-. Hence the entire difference of 56, 66, 732/- was explained. The CIT(A) accepted the explanation of the assessee. Now before us Ld. CIT DR fairly conceded the position. Accordingly we feel that factually the assessee has not received excess rent of 56, 66, 732/- added by the AO. We find that the CIT(A) has rightly deleted the addition in the given facts and circumstances of the case and we confirm the same. This issue of revenue s appeal is dismissed. Correct head of income - treating the receipt from the occupants of Industrial Parks and income from house property instead of the same as assessable as income from business - HELD THAT - Assessee was not letting out bare structure but was providing whole lot of services/amenities for software and allied industries as eligible for use of such Industrial Park. In such circumstances the assessee claimed the rental receipts from the occupants of the Industrial park as business income. We find that this issue is covered by the decision of Hon ble Supreme Court in the case of Chennai Properties Investments Ltd. 2015 (5) TMI 46 - SUPREME COURT - In this case letting of the properties is in fact is the business of the assessee. The assessee therefore rightly disclosed the income under the head Income from business . It cannot be treated as Income from the house property . Appeal of assessee allowed.
Issues Involved:
1. Disallowance of deduction under Section 80IA(4)(iii) of the Income Tax Act. 2. Disallowance of interest on interest-free advances. 3. Disallowance of depreciation. 4. Addition on account of difference in the statement of accounts. 5. Treatment of rental income from industrial parks as business income or income from house property. Issue-wise Detailed Analysis: 1. Disallowance of Deduction under Section 80IA(4)(iii) of the Income Tax Act: The primary issue was whether the assessee was eligible for deduction under Section 80IA(4)(iii) for developing an industrial park. The AO disallowed the deduction citing the non-furnishing of a completion certificate from the Bangalore Development Authority and the increase in the number of units constructed beyond the approved three units. The CIT(A) upheld this disallowance, emphasizing the lack of a CBDT notification and failure to complete the industrial park by the prescribed date of 31.03.2007. However, the Tribunal noted that the assessee had obtained necessary approvals from the Ministry of Commerce and Industry and had applied for the completion certificate on 29.12.2006. It was observed that various judicial authorities, including the Karnataka High Court and Bombay High Court, held that once the Ministry of Commerce approves an industrial park, the CBDT notification is a mere formality. The Tribunal concluded that the industrial park was completed within the stipulated period and allowed the deduction under Section 80IA(4)(iii). 2. Disallowance of Interest on Interest-Free Advances: The CIT(A) disallowed interest on advances given to sister concerns, arguing that these were not for business purposes. The Tribunal, however, found that the advances were made for acquiring real estate properties and loans to associate concerns in the same line of business, thus constituting commercial expediency. The Tribunal cited the Supreme Court's decision in Hero Cycles Pvt. Ltd. v. CIT, which emphasized that advances made out of commercial expediency should not be disallowed. It was also noted that the AO and CIT(A) failed to establish a nexus between interest-bearing funds and interest-free advances. The Tribunal allowed the interest expenditure, ruling in favor of the assessee. 3. Disallowance of Depreciation: The issue revolved around whether depreciation not claimed in the initial computation could be allowed. The CIT(A) admitted an additional ground for depreciation based on the Supreme Court's decision in NTPC Ltd. and remanded the matter to the AO for verification. The Tribunal upheld the CIT(A)'s decision, noting that depreciation allowance is mandatory under Section 32, irrespective of whether it is claimed by the assessee. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the revenue's appeal. 4. Addition on Account of Difference in the Statement of Accounts: The AO added Rs. 56,66,732 due to discrepancies between the actual receipts and TDS certificates from various parties. The CIT(A) deleted the addition after the assessee explained that the differences were due to timing issues and service tax components. The Tribunal confirmed the CIT(A)'s decision, noting that the assessee had provided satisfactory explanations for the discrepancies, and the revenue's appeal was dismissed. 5. Treatment of Rental Income from Industrial Parks as Business Income or Income from House Property: The AO treated the rental income from the industrial park as income from house property, while the assessee claimed it as business income. The CIT(A) ruled in favor of the assessee, stating that the primary objective was commercial exploitation of the property, providing various services and amenities to the occupants. The Tribunal upheld this view, referencing the Supreme Court's decision in Chennai Properties & Investments Ltd. v. CIT, which held that income from letting out properties as part of business operations should be treated as business income. The Tribunal dismissed the revenue's appeal on this issue. Conclusion: The Tribunal allowed the assessee's appeals, granting the deduction under Section 80IA(4)(iii), interest expenditure, and treating rental income as business income. The revenue's appeals were dismissed, upholding the CIT(A)'s decisions on depreciation and deletion of additions for discrepancies in the statement of accounts.
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